A plan supported by President Barack Obama to allow troubled homeowners to refinance their mortgages will come at the expense of the taxpayer, says famed Rochdale Securities banking analyst Dick Bove.
Under the plan, homeowners will be able to refinance to low rates near 4 percent with the aim of helping the 25 percent of all homeowners whose houses are underwater, Bove tells CNBC.
Supporters say lower housing payments frees up cash that will go to consumer spending, which the economy desperately needs to improve.
|President Barack Obama
(Getty Images photo)
Bove, however, says the billions in homeowner savings would translate to costs for taxpayers who subsidize government-sponsored agencies such as Fannie Mae, and to banks which will lose that much revenue with the refinancing, CNBC reports.
The private sector could have worked out the problem on its own if it weren't for excessive regulations slapped on the financial system by the Obama administration.
"The point that neither the administration, the Treasury nor the Fed can seem to understand is that they have strangled bank lending with their capital and liquidity rules and their price fixing requirements," Bove says, CNBC adds.
"This was a core reason why bank lending did not open up to facilitate a refinancing boom."
The housing sector threw the economy into recession and continues to lag on the economy.
Home prices rose 3.6 percent in the second quarter of this year, compared with the three months ended March 31, but are still down 5.9 percent compared with the second quarter of 2010, according to CNN.
Experts say the market is not on the road to recovery just yet.
Anthony Sanders, a real estate professor at George Mason University, describes the positive news as a "blip."
"I would take it with a grain of salt," Sanders tells CNN, adding " I'd be very surprised if, come fall, the increases continue."
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